2019 (1) TMI 734 - HC - Customs

Release of goods - undervaluation - second respondent has disowned the entire transaction - Held that - Indeed, there is more than what meets the eye in this transaction. It reflects how a statutory scheme is exploited or abused. The second respondent holds the I-E code, but admittedly its Proprietor knows nothing about either import or export. He seems to be a name lender. And that name lending is with his actual knowledge, at that. He admits that earlier too there had been transactions - The Ext.P3 show cause notice records that the Proprietor of the second respondent has agreed that the goods were sent in his name with his consent and they are meant for the third respondent. Nevertheless, faced with the detention and the allegation of undervaluation, only before this Court has he disowned the transaction. Indeed, it is a matter the Department must probe into. Pending adjudication of the proceedings under the Ext.P3, the second respondent will get the goods released, without any liability attached to it, and hand them over to the third respondent.

Summary

Issues:
1. Dispute over detained goods due to suspected undervaluation.
2. Disagreement between second and third respondents.
3. Request for re-export of goods to Dubai.
4. Legal proceedings initiated by Customs Department.
5. Dispute resolution and liability allocation.

Analysis:
1. The petitioner, a businessman, sent goods to the third respondent through the second respondent, who holds the Import-Export Code. The goods were detained at Cochin Port for suspected undervaluation, leading to a disagreement between the second and third respondents.

2. The petitioner exported goods from Dubai to the third respondent with a credit facility, but due to unresolved disputes and detention, he seeks re-export of the goods. The Customs Department, along with the second and third respondents, engaged in legal proceedings, including filing counter affidavits and replies.

3. During the proceedings, it was revealed that the second respondent, despite holding the Import-Export Code, had limited knowledge of the transactions and claimed to be misled by various parties, including an advocate. The court emphasized the need for a thorough investigation into the misuse of the Import-Export Code.

4. The judgment directed the provisional release of goods to the second respondent, who would then hand them over to the third respondent. The third respondent was instructed to comply with all Departmental conditions for release and participate in the inquiry. The third respondent assumed liability for statutory obligations, including payment to the petitioner.

5. Additionally, the judgment highlighted the need for cooperation between the second and third respondents to ensure the agreed arrangement's success. The Department was tasked with preventing future misuse of the Import-Export Code and expediting the ongoing proceedings. The court deemed the arrangement expedient but not a precedent for future cases.